The Service Stream Limited (ASX: SSM) share price has increased by over 20% since the start of 2019. Service Stream's all-time high of $2.26 was reached late March 2019 and currently trades at a share price of $2.18.
I think the 20% increase we've seen so far still has strong room for growth as we progress towards the annual reporting season.
Service Stream well positioned based on its financial statements
Service Stream is an essential networks service operator in mobile communications, fixed communications, electricity, water and gas.
From the recent half-year announcements, the profitability figures of Service Stream showed strong growth across revenue, EBIT, EBITDA and net profit. Revenue was up 18.3%, EBIT was up 20.3%, EBITDA was up 18.7% and net profit was up 21%. Earnings per share showed an increase of over 22% compared to the previous half year-report.
Service Stream's cash flow statement shows an increased cash reserve of 9% compared to the previous half-year report. Due to recent performance, dividends per share were also increased by 17% to 3.5 cents per share.
The recent acquisition of Comdain is expected to deliver revenues of $320 million and EBITDA of $22 million for the full-year, boosting profitability in its water and gas sectors. Service Stream has also performed a share buyback which alongside the acquisition, should see its earnings per share increase further in FY2019.
Service stream continues to show value in its PE of 17.2 compared to the industry trading at 26 times earnings. Furthermore, the company is continuing to expand its client base and has acquired crucial long-term customers. Recently, a new contract was entered with Telstra Corporation Ltd (ASX: TLS) until June 2021 to provide design and construction services, supporting Telstra's wireless infrastructure network.
Furthermore, the management team is diligent with its expansions. The acquisition of Comdain was performed when Service Stream carried an appropriate cash flow to debt coverage. A strong management team that understands the financial position of its business well is mandatory for future company growth.
Foolish takeaway
Service Stream is a business with a resilient theme, strong financials and currently priced at a discount compared to its industry. In addition to the expected increases in profitability, Service Stream's business should be capable of withstanding unexpected market turbulence.
